Dec 13th, 2021

The Politics of Productivity: institutions, governance and policy

This paper explores the ‘politics of productivity’ by focusing on the political institutions, the system of governance, and the policies that have shaped the UK’s poor productivity performance. The starting point is that the deepening divide between economics and political science reinforces over-specialisation that ignores the complex connections between economic and political drivers of productivity. We propose a broad, political economy perspective that combines the study of the more ‘political’ institutions that are specific to the UK’s productivity performance – including structural weaknesses in national, regional, local government – with an evaluation of the flaws of more ‘economic institutions’ such as finance, R&D dissemination or firms, as well as an insufficiently robust social and civic infrastructure such as universities, training colleges, professional associations or trade unions.

In section 1 we group the deep structural features of the UK’s productivity problem into four stylised facts:

  • over-centralisation
  • weak, ineffective institutions and policy churn
  • institutional and policy silos
  • short-termism and poor policy coordination.

Section 2 analyses the meaning and role of institutions in the UK landscape, while section 3 situates the country’s productivity performance within a wider governance system that is dysfunctional. Section 4 focuses on key policy challenges in the wake of austerity, Brexit and Covid.

Each section contains some key research questions, which the Governance & Institutions theme of the Productivity Institute will address over the coming months and years. One of the main arguments we develop is that the UK’s institutions and policies of productivity are too centralised in spatial, geographic terms and simultaneously too fragmented in functional, sectoral terms. Both these factors contribute to the country’s low productivity growth.

This is part of a series of working papers outlining the key issues and questions of The Productivity Institute’s key research themes. This paper covers the Institutions & governance research theme. Other papers will provide an overview of Human capital, Organisational capital, Knowledge capital, Geography and place, Macroeconomic trends & policy, Social, environmental and technological transitions and Measurements & methods.

Themes

  • Institutions & Governance

Published

13/12/2021

Cite

A. Pabst, A. Westwood (2021) The Politics of Productivity: institutions, governance and policy Working Paper No. 015, The Productivity Institute.